UPS' Profit May Be Falling But It Will Still Give You $500 A Month

Zinger Key Points
  • Amid labor disputes with the Teamsters, UPS trimmed its full-year revenue guidance by $4 billion.
  • Despite challenges, UPS committs to $5.4 billion in dividends and $3 billion in share repurchases.

Clouds gathered over United Parcel Service, Inc UPS after a shaky second quarter influenced heavily by labor disputes.

What Happened: UPS hit a rough patch this year primarily due to its ongoing labor disputes with the Teamsters union. A tentative agreement was reached late last month, but the proof will be in the pudding on Aug. 22, when the union members cast their votes.

The labor cloud over UPS hasn’t just been a PR challenge, it has real fiscal implications. The company trimmed its full-year revenue outlook by a notable $4 billion, attributing it partly to business losses during the prolonged labor negotiations.

The uncertainty of the labor talks led many shippers to look elsewhere, notably to rivals such as FedEx Corp FDX and the U.S. Postal Service.

While the company grapples with its challenges, it is intent on ensuring its investors have something to cheer about. UPS committed to its payout plan, promising to distribute $5.4 billion in dividends and repurchasing $3 billion in shares.

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The Dividend Attraction: With the current yield at 3.58%, UPS remains an attractive option for those income investors looking to pad their income.

So, just how much do you need to invest in UPS to reap a monthly dividend check of $500?

Here’s A Breakdown: To receive a monthly dividend payout of $500, or $6,000 annually, an investor would need to buy 929 shares of UPS. Currently trading at just over $180, the 929 shares will run you about $167,599.

For a more modest dividend income, 186 shares — $33,520 — would yield an investor an extra $100 each month.

Note that the dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.

The dividend yield is calculated by dividing the annual dividend payment by the current stock price. As the stock price changes, the dividend yield will also change.

If a stock pays an annual dividend of $2 and its current price is $50, its dividend yield would be 4%. However, if the stock price increases to $60, the dividend yield would decrease to 3.33% ($2/$60).

Conversely, if the stock price decreases to $40, the dividend yield would increase to 5% ($2/$40).

The dividend payment itself can also change over time, which can also impact the dividend yield. If a company increases its dividend payment, the dividend yield will increase even if the stock price remains the same. Similarly, if a company decreases its dividend payment, the dividend yield will decrease.

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